Small business confidence report: Meh

NFIB economist Bill Dunkelberg: Lackluster improvement in the economy.

The NFIB Small Business Optimism Survey climbed 1.4 points to 98.3 as six of 10 components improved.

“It appears that the small-business sector has finally attained a normal level of activity, which will hopefully keep the economy moving forward, even at a subpar pace,” NFIB chief economist Bill Dunkelberg said.

The Index of Small Business Optimism increased 1.4 points to 98.3 in spite of 5 months of what he called “lousy” growth. May is the best reading since the 100.4 December reading but “nothing to write home about,” Dunkelberg reported. The 42 year average is 98, a bit lower than the 99.5 average through 2007. Eight of the 10 Index components posted improvements. Overall, the Index remained in a holding pattern, a few points below the pre-recession average and showing no tendency to “break out” into a stronger pattern of economic growth.


Small businesses posted another decent month of job creation in May, a string of five solid months of job creation. On balance, owners added a net 0.13 workers per firm over the past few months. Fourteen percent reported raising employment an average of 2.7 workers per firm while 12 percent reported reducing employment an average of 3 workers per firm. Fifty-five percent reported hiring or trying to hire (up 2 points), but 47 percent, reported few or no qualified applicants for the positions they were trying to fill. Thirteen percent reported using temporary workers. Twenty-nine percent of all owners reported job openings they could not fill in the current period, up 2 points, the highest reading since April 2006.


The seasonally adjusted net percent of all owners reporting higher nominal sales in the past three months compared to the prior three months rose a stunning 11 points to a net 7 percent. Eleven percent cited weak sales as their top business problem (unchanged). Expected real sales volumes posted a 3 point decline, falling to a net 7 percent of owners expecting gains, after a 5 point decline in January and February, a 2 point decline in March and a 3 point decline in April. Overall, expectations are not showing a lot of strength.


Seasonally adjusted, the net percent of owners raising selling prices was 6 percent, up 4 points but still a “tame” reading. However, if the strength in sales gains persists, owners will have more opportunities to raise prices. Seasonally adjusted, a net 17 percent plan price hikes (unchanged). The economy has grown too slowly to support widespread price hikes.

Earnings and wages

Earnings trends posted an unexpected 9 point gain, posting a reading of a net negative 7 percent reporting higher earnings, on top of a 6 point improvement in April. is the best reading since October 2005. The main factor improving the earnings trend was the decline in the percent reporting lower earnings quarter on quarter.

Reports of increased labor compensation rose a point to a net 25 percent of all owners. Reports of gains frequent occurred in December 2014 and January of year, but those are the highest readings since January 2008 when employment last peaked before the recession. Labor costs continue to put pressure on the bottom line, but fuel prices are down a lot and sales trends much stronger. should begin to show up in wage growth, although rising benefits offset potential increases in take-home pay. A seasonally adjusted net 14 percent plan to raise compensation in the coming months (unchanged). The reported gains in compensation are still in the range typical of an economy with reasonable growth.


Four percent of owners reported that all their borrowing needs were not satisfied, unchanged and historically low. Thirty percent reported all credit needs met, and 50 percent explicitly said they did not want a loan. For most of the recession, record numbers of firms have been on the “credit sidelines”, seeing no good reason to borrow. Only 2 percent reported that financing was their top business problem (unchanged). In the Great Recession, no more than 5 percent cited credit availability and interest rates as their top problem (chart) compared to as high as 37 percent in the Volcker era. If credit availability is really a problem, owners let it be known. Twenty-nine percent of all owners reported borrowing on a regular basis, down 1 point.